InfoUSA: Special Company Panel Keeping Its Work Quiet
By Virgil Larson, Omaha World-Herald, Neb.
Jan. 11–InfoUSA Inc. is keeping quiet about what steps a special committee, appointed Dec. 24, might take to resolve a shareholder lawsuit and a Securities and Exchange Commission investigation.
It isn’t, for example, saying whether the committee is empowered to look at the possibility of selling the company.
“It’s more than fact-finding,” committee member Bernard Reznicek said of the assignment. He declined, though, to spell out the scope of the committee’s responsibility.
The four other committee members either declined to be interviewed, didn’t return phone calls or could not be reached.
Even company founder Vin Gupta, who usually responds to interview requests, would not talk about whether a sale to him or somebody else would be considered. “I’ve been muzzled,” he said.
Given past developments, though, a sale could hardly be off the list of the settlement possibilities.
Gupta’s bid to buy out the company and take it private 2 1/2 years ago is a major issue in the lawsuit brought by investment funds that had urged InfoUSA to seek outside buyers.
Gupta’s opposition to a board committee’s proposal to look for other possible buyers led him to withdraw his offer and say he would never sell his stock. Gupta owns 40 percent of InfoUSA.
Selling to anybody but him would jeopardize InfoUSA’s presence in Omaha, Gupta has said.
“You sell the company today and a private-equity company or a hedge fund buys the company, the first thing they will do (is say) ‘OK — how many jobs can we outsource to China or India or Philippines?’ They won’t care what happens to the workers here,” Gupta has said.
He said 1,200 of InfoUSA’s 1,600 jobs in the Omaha area would be likely to disappear in a sale to an outside group.
Annual payroll in the Omaha area is $75 million. Companywide employment is 5,000.
To satisfy the investment funds, a sale probably would have to bring considerably more than the $8.81 that InfoUSA shares brought at Thursday’s market close. Two investment funds of Connecticut-based Dolphin Holdings paid an average of $10.65 a share for the 2 million shares they bought in a little less than a year beginning in late June 2005.
Dolphin’s buying started shortly after Gupta offered $11.75 for the shares he didn’t already own.
The stock hit $13.01 in March 2006, the highest price in the last three years. The all-time high was $17.62 in 1998. The company has been publicly traded since 1992.
To complaints about the stagnant stock price by Dolphin and others, Gupta has said no one has more interest in raising the stock price than he. Ninety percent of his net worth is in company stock, Gupta said.
But more important than the short-term stock price is building the company, he said.
InfoUSA, which has acquired dozens of database marketing companies, in late 2006 bought Opinion Research Corp., which polls for the federal government, businesses and CNN. It boosted InfoUSA’s revenue by about half.
Revenue, $383 million in 2005, will pass $700 million this year and reach $1 billion “in a couple of years,” Gupta has said.
While Gupta has maintained he will not sell his piece of the company and though he has spoken harshly about the investment fund managers, he has said he is open to talking about an out-of-court settlement of the lawsuit.
“We will talk, I’m sure, if they want to talk,” he said.
Donald Netter, the head of Dolphin Holdings, declined to be interviewed.
InfoUSA executives and the special committee won’t talk about what the company must do to satisfy the SEC, which has opened an informal investigation of the company.
The SEC has requested records on transactions between InfoUSA and company insiders, on expense reimbursements, and on “certain trading” in the company’s stock.
That request generally parallels the allegations in the investment funds’ lawsuit in Delaware Court of Chancery that Gupta misspent millions in company funds and that the board failed to rein him in. Gupta has said the company will prove in court that the spending was for legitimate business purposes.
Two of the five directors on the special committee, Reznicek and Bill Fairfield, are defendants with Gupta and eight other directors and former directors.
The three other committee members, George Krauss, Robin Chandra and Thomas Weatherford, were named to the board Dec. 24, the same day the Special Committee for Internal Investigation and Derivative Litigation was created.
“The fact that they brought in new people speaks well of what they are doing,” Carr Conway, a retired SEC investigator, said of the company. “New people are more likely to find out what is wrong . . . (saying) ‘It was not on our watch, and we’re going to clean it up.’”
Conway was speaking in general and said he had no specific knowledge of InfoUSA.
Companies are well-served to cooperate with SEC investigations, Conway said. The SEC is inclined to credit companies for cooperating when it decides what, if any, action is to be taken, Conway said.
But as for accepting a company’s self-investigation, Conway said, it is his experience that the SEC will say, “Thanks, but we want to check it out for ourselves.”
InfoUSA’s special committee
Following are members of a special committee at InfoUSA Inc. looking into a shareholder lawsuit and a Securities and Exchange Commission investigation. The first three were named to the board and committee Dec. 24.
Robin Chandra, managing partner in the California office of international investment firm Bessemer Venture Partners, which held 4,730 shares of InfoUSA as of July 31. He once worked at McKinsey & Co., a consulting firm from which Vin Gupta hired Scott Dahnke in 1997 to be chief executive of InfoUSA. Dahnke was in the position less than a year before Gupta took the job back.
George Krauss, former managing partner at Omaha law firm Kutak Rock. He was on the board of West Corp., a publicly traded Omaha company taken private in late 2006. Among other boards on which he has served are computer maker Gateway Inc. and Burlington Capital Group, Omaha, where he is a consultant.
Thomas Weatherford, retired executive who worked at several U.S. technology firms. He is credited in InfoUSA’s press release with helping bring Peregrine Software out of a Chapter 11 bankruptcy resulting from an Enron-like financial scandal that occurred before Weatherford’s arrival as chief financial officer. Peregrine later was sold.
Bill Fairfield, board member since late 2005. He was CEO of Valcom and, after a 1991 merger, of successor Inacom Corp., a computer services and custom-computer maker. He later was an executive of Sitel Corp. of Omaha, since sold into private hands, and now is chairman of DreamField Capital Ventures.
Bernard Reznicek, former president of the Omaha Public Power District, former CEO of Boston Edison, former dean of Creighton University’s College of Business and now CEO of Premier InfoUSA’s Premier Enterprises Inc, a consulting and real estate investment firm, and chairman of the board of CSG Systems. He joined the InfoUSA board in 2006.
—–
To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com.
Copyright (c) 2008, Omaha World-Herald, Neb.
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
NASDAQ-NMS:IUSA, NYSE:TWX, NYSE:GTW, NYSE:ENE, NASDAQ-OTCBB:VLCO, NYSE:NST, NASDAQ-NMS:CSGS,